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UK Regulator Approves 5 New Banks, with 30 New Banks Expected; Credit Market Very Bullish, 125% LTV to make a come back
Topic Started: 16 Aug 2014, 11:30 AM (1,943 Views)
Bardon
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Ned Flanders
16 Aug 2014, 01:50 PM
On the other hand, if global population goes into secular decline, which it will unless we replaced fossil fuels with some other type of cheap energy, land values will fall.
History shows that the land price cycle always peaks, before credit contracts, but as for your point on population then there is the great wave the largest and longest economic cycles that has been measured and charted.

As for the energy source for our power I believe that we are heading towards the hydrogen age. We have went from wood, to coal, to oil, to gas each time we have fewer carbon elements in the hydrocarbon the next step being pure hydrogen.

The only time that population decline happened on earth was following the medieval price revolution period, since then the effect has been a reduction of population growth rate following every price revolution, maybe that's what we will get when the 20th century price revolution ends, who knows. Following each price revolution returns on capital decline markedly. That is the only scenario that I can see at the end of this current price revolution. Not to confuse the long price revolution cycles wit hteh afr shorter land price cycles.

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If you are interested in this wave, then I recommend that you read The Great Wave: Price Revolutions and the Rhythm of History, the first chapter is available here for free.

http://books.google.com.au/books?id=-efB6GTgNdAC&printsec=frontcover&source=gbs_atb#v=onepage&q&f=false
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Jimbo
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Bardon
16 Aug 2014, 03:43 PM
The only time that population decline happened on earth was following the medieval price revolution period, since then the effect has been a reduction of population growth rate following every price revolution, maybe that's what we will get when the 20th century price revolution ends, who knows. Following each price revolution returns on capital decline markedly. That is the only scenario that I can see at the end of this current price revolution. Not to confuse the long price revolution cycles wit hteh afr shorter land price cycles.

The trouble is that the UK cannot continue to grow its population exponentially without new sources of food and energy. Britain is a net importer of both at the moment. The British economy is feeding on the wealth effect generated by its property market with manufacturing and exports both in a long term decline.

Going back to your original point that some new banks will be opening their doors soon, I can't see how this will increase already stretched land prices, even if your assumption that these new banks would start offering 125% LTV loans becomes true.

The Brits are wary of their property market having seen many wiped out in the late 80's and early 90's. They had a reminder of that again in 2007. I can't imagine a Brit taking out a loan at 100% LTV (let alone 125%) unless he was stark raving mad.


Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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peter fraser
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Bardon
16 Aug 2014, 11:42 AM
Increased competition to give more credit out to borrowers, same as it ever was, it wont happen tomorrow but the writing is on the wall. These new banks will be lending to the next wave of canny property investors, one thing will led to another and presto 125% LTV in some form or another will re-appear.
I appreciate your concern but my view is that we won't go back to the days of 125% loans. I think the possibility of that is about zero. BTW I only saw 105% loans here although maybe we had a few 110% offerings as well. I have never written anything above 97% plus LMI - the over 100% loans were really just click bait for homebuyers. Mathematically they just didn't make sense. The setup costs were huge so the net loan amount available to the borrower at settlement was less than a 97% loan, which is absurd.

My gut feeling is that after this current little hurrah in housing, long term growth will probably settle down to 2% to 4% per annum which is much less than the 7% we got used to over recent decades. I think it will struggle to beat CPI.

Any expressed market opinion is my own and is not to be taken as financial advice
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Bardon
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Jimbo
16 Aug 2014, 05:38 PM
Going back to your original point that some new banks will be opening their doors soon, I can't see how this will increase already stretched land prices, even if your assumption that these new banks would start offering 125% LTV loans becomes true.

The Brits are wary of their property market having seen many wiped out in the late 80's and early 90's. They had a reminder of that again in 2007. I can't imagine a Brit taking out a loan at 100% LTV (let alone 125%) unless he was stark raving mad.

The more banks, the more credit that eventually finds it way into land values. The politicians and the regulators can fiddle on the sidelines as much as they want with new laws and regulations but the underlying structure of the economy doesn't change and that's why we will always have the boom and bust cycle.

Okay apart form the cost, what is wrong with a 100% loan, I know plenty of UK folk that would go for them for investments?

I have always went for the maximum amount of finance for my investments.
peter fraser
16 Aug 2014, 07:35 PM
I appreciate your concern but my view is that we won't go back to the days of 125% loans. I think the possibility of that is about zero. BTW I only saw 105% loans here although maybe we had a few 110% offerings as well. I have never written anything above 97% plus LMI - the over 100% loans were really just click bait for homebuyers. Mathematically they just didn't make sense. The setup costs were huge so the net loan amount available to the borrower at settlement was less than a 97% loan, which is absurd.

My gut feeling is that after this current little hurrah in housing, long term growth will probably settle down to 2% to 4% per annum which is much less than the 7% we got used to over recent decades. I think it will struggle to beat CPI.
I was referring to the UK not Oz here.

By 2025 no one in the UK under 40 will have a memory of 08.

I think that our growth will also be subdued during the next few years as we did not have much of a correction, but I am convinced that this cycle will be bigger than the last one, there is plenty of time for it to pan out as well.
Edited by Bardon, 16 Aug 2014, 09:28 PM.
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Poontang
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The available pool of buyers is only so big, more banks will mean greater competition to attract business... either lower rates or higher LVR's

Thw weaker banks would probably not survive longer term and be bought out...
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Bardon
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Yes but there will be more availability of credit, which in the run up stage will be used to bid up the price of the fixed amount of land that is available.

The fact that there is now 5 new banks in the UK with another 25 in discussion says that the credit crunch is history and credit creation is back in fashion. Increased credit always eventually finds its way into increased land value as it will again.
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Jimbo
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Bardon
16 Aug 2014, 09:39 PM
Yes but there will be more availability of credit, which in the run up stage will be used to bid up the price of the fixed amount of land that is available.

The fact that there is now 5 new banks in the UK with another 25 in discussion says that the credit crunch is history and credit creation is back in fashion. Increased credit always eventually finds its way into increased land value as it will again.
But there is no credit crunch in UK property? UK credit conditions have been relaxed for years. They have only tightened somewhat within the last few months. You are talking total bollocks.

http://www.thisismoney.co.uk/money/mortgageshome/article-2454161/Cash-buyer-hotspots-A-homes-bought-mortgage.html


Edited by Jimbo, 16 Aug 2014, 10:13 PM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Bardon
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Jimbo
16 Aug 2014, 10:10 PM
But there is no credit crunch in UK property? UK credit conditions have been relaxed for years. They have only tightened somewhat within the last few months. You are talking total bollocks.

http://www.ft.com/intl/cms/s/0/4d5e2e14-21e8-11e3-9b55-00144feab7de.html#axzz3AYIbiYxa

Jimbo, me and you will never see eye to eye and that's just fine by me. Lets just see how it pans and if prices follow there usual cycle and increase or not.
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Ned Flanders
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Bardon
16 Aug 2014, 03:43 PM
History shows that the land price cycle always peaks, before credit contracts, but as for your point on population then there is the great wave the largest and longest economic cycles that has been measured and charted.
Yes, and the price revolution follows each energy revolution. The only significant economic event in the last 700 years in Europe that wasn't driven by energy was the bubonic plague, which made labour so scarce it started the end of the system of indentured servitude.
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As for the energy source for our power I believe that we are heading towards the hydrogen age. We have went from wood, to coal, to oil, to gas each time we have fewer carbon elements in the hydrocarbon the next step being pure hydrogen.

Except that nearly all of the hydrogen on this planet is currently attached to carbon or oxygen with a strong chemical bond. It takes energy to make hydrogen. All fossil fuels, wood, coal, oil, gas are stored sunlight. Our civilisation runs on stored sunlight. Beneath our feet is uranium and thorium. So, two sources of energy, sunlight or nuclear. Which do you think we will use to make the hydrogen?
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The only time that population decline happened on earth was following the medieval price revolution period, since then the effect has been a reduction of population growth rate following every price revolution, maybe that's what we will get when the 20th century price revolution ends, who knows.

Yes, there was always a transition period after the new energy source peaked. Hard to know if there will be long transition period after the end of oil. Certainly shaping up that way at the moment. However, this is a very unusual time for the planet. This is the first time in at least 5000 years that information travels globally almost instantaneously. Any technologies or strategies or lifestyle or philosophical changes that occur will disseminate incredibly quickly. And there is a lot of leapfrogging going on. African countries whose citizens never talked into a landline phone are growing mobile phone networks incredibly fast.
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Following each price revolution returns on capital decline markedly. That is the only scenario that I can see at the end of this current price revolution.

There is a saying that a large enough quantitative change will become a qualitative change. I think the nature of capital itself will change. Capital is just not important enough anymore relative to information and innovation. We are seeing, and will continue to see, a decentralisation in the management and allocation of capital. The current banking system is a dinosaur. The smaller mammal capital allocators will just evolve too fast for the current megabanks. I give the process 15 years at the outside. I don't think this cycle of financial innovation will come from the Western world though. It might start there, but I don't think that is where it will rapidly evolve. The West is full of pampered useless eaters who cry out to their government for help anytime something goes bump in the night.
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If you are interested in this wave, then I recommend that you read The Great Wave: Price Revolutions and the Rhythm of History, the first chapter is available here for free.
http://books.google.com.au/books?id=-efB6GTgNdAC&printsec=frontcover&source=gbs_atb#v=onepage&q&f=false

Thanks, I'll check it out. I also recommend The Next Economy by Paul Hawken and The End of Oil by Paul Roberts.
http://www.amazon.com/Next-Economy-Paul-Hawken/dp/0345313925/ref=la_B000APTSBC_1_9?s=books&ie=UTF8&qid=1408187498&sr=1-9
http://www.amazon.com/End-Oil-Edge-Perilous-World/dp/B002SB8MV8/ref=sr_1_1?s=books&ie=UTF8&qid=1408187614&sr=1-1&keywords=the+end+of+oil
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- Alan Glynn
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Jimbo
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Bardon
16 Aug 2014, 10:14 PM
Jimbo, me and you will never see eye to eye and that's just fine by me. Lets just see how it pans and if prices follow there usual cycle and increase or not.
I assume that you must be Mike under another alias.

You use the same grammatical errors to start with.

The UK property market is an animal you have to live with to begin to understand.

In London you can walk from a drug infested council estate slum to a millionaires row in less than 2 minutes.

Anything worth owning in the UK has been well and truly bought.

London is a 1/3rd cash buyers market.

You are talking out of your arse.

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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